Order Code IB95024
CRS Issue Brief for Congress
Received through the CRS Web
Armenia, Azerbaijan, and Georgia:
Political Developments and
Implications for U.S. Interests
Updated March 17, 2005
Jim Nichol
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Overview of U.S. Policy Concerns
Post-September 11
Operations in Iraq
Obstacles to Peace and Independence
Regional Tensions and Conflicts
Nagorno Karabakh Conflict
Civil and Ethnic Conflict in Georgia
Economic Conditions, Blockades, and Stoppages
Democratization Problems
Armenia
Azerbaijan
Georgia
The South Caucasus’ External Security Context
Russian Involvement in the Region
Military-Strategic Interests
Caspian Energy Resources
The Protection of Ethnic Russians and “Citizens”
The Roles of Turkey, Iran, and Others
U.S. Aid Overview
U.S. Security Assistance
U.S. Trade and Investment
Energy Resources and U.S. Policy
LEGISLATION

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Armenia, Azerbaijan, and Georgia:
Political Developments and Implications for U.S. Interests
SUMMARY
The United States recognized the inde-
In the aftermath of the September 11,
pendence of all the former Soviet republics by
2001 terrorist attacks on the United States, the
the end of 1991, including the South Caucasus
Administration appealed for a national secu-
states of Armenia, Azerbaijan, and Georgia.
rity waiver of the prohibition on aid to
The United States has fostered these states’
Azerbaijan, in consideration of Azerbaijan’s
ties with the West in part to end the depend-
assistance to the international coalition to
ence of these states on Russia for trade, secu-
combat terrorism. In December 2001,
rity, and other relations. The United States
Congress approved foreign appropriations for
has pursued close ties with Armenia to en-
FY2002 (P.L. 107-115) that granted the Presi-
courage its democratization and because of
dent authority to waive Sec. 907, renewable
concerns by Armenian-Americans and others
each calendar year under certain conditions.
over its fate. Close ties with Georgia have
President Bush exercised the waiver most
evolved from U.S. contacts with its pro-West-
recently on January 13, 2005.
ern leadership. The Bush Administration
supports U.S. private investment in
As part of the U.S. Global War on Ter-
Azerbaijan’s energy sector as a means of
rorism, the U.S. military in May 2002 began
increasing the diversity of world energy sup-
providing security equipment and training to
pliers and encourages building multiple en-
help Georgia combat terrorist groups in its
ergy pipelines to world markets. The United
Pankisi Gorge area and elsewhere in the
States has been active in diplomatic efforts to
country. Azerbaijani and Georgian troops
end conflicts in the region, many of which
participate in stabilization efforts in Afghani-
remain unresolved.
stan and Iraq, and Armenian personnel serve
in Iraq.
The FREEDOM Support Act (P.L. 102-
511) provides the major authorization for
Consolidated Appropriations for
assistance to the Eurasian states for humani-
FY2005, including Foreign Operations (P.L.
tarian needs, democratization, creation of
108-447, signed into law on December 8,
market economies, trade and investment, and
2004), provides $205 million in FREEDOM
other purposes. Sec. 907 of the act prohibits
Support Act (FSA) assistance to the South
most U.S. government-to-government aid to
Caucasus states. The Conference managers
Azerbaijan until its ceases blockades and other
(H.Rept.108-792) direct $75 million in FSA
offensive use of force against Armenia. This
funding for Armenia ($13 million above the
provision has been partly altered over the
budget request), $38 million for Azerbaijan,
years to permit humanitarian aid and democra-
and $92 million for Georgia ($2 million above
tization aid, border security and customs
the budget request). The managers call for at
support to promote non- proliferation, Trade
least $3 million to be “provided to address
and Development Agency aid, Overseas
ongoing humanitarian needs in Nagorno
Private Investment Corporation insurance,
Karabakh.” Among other foreign assistance,
Eximbank financing, and Foreign Commercial
$8 million is provided for Armenia, $8 million
Service activities.
for Azerbaijan, and $12 million for Georgia
for Foreign Military Financing.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
In testimony to the Senate Armed Services Committee March 1, 2005, Gen. James
Jones, head of U.S. European Command (EUCOM), stated, “The Caucasus is increasingly
important to our interests. Its air corridor has become a crucial lifeline between coalition
forces in Afghanistan and our bases in Europe. Caspian oil, carried through the Caucasus,
may constitute as much as 25 percent of the world’s growth in oil production over the next
five years, while Caspian hydrocarbons will diversify Europe’s sources of energy. This
region is a geographical pivot point in the spread of democracy and free market economies
to the states of Central and Southwest Asia.” He stated that EUCOM had implemented a
“Caspian Guard initiative” establishing an “integrated airspace, maritime and border control
regime” for Azerbaijan and Kazakhstan. In Georgia, EUCOM was supporting training for
two peacekeeping battalions for service in Iraq.
Following a mid-February 2005 crackdown by guards at several Azerbaijani prisons that
seemed to target alleged “political prisoners,” a delegation composed of U.S, Norwegian,
Greek, German, and British diplomats and others visited the prisons. A riot at one prison,
the suspicious death of a twenty-year-old dissident (who was imprisoned after violence
associated with the 2003 presidential election), and the assassination of a prominent
opposition journalist added to international human rights concerns. The Azerbaijani
government issued a statement March 11, 2005 announcing the arrests of high-level Interior
(police) Ministry officials on multiple charges of kidnaping and murder. According to local
media, the U.S. Federal Bureau of Investigation (FBI) assisted in uncovering this criminal
ring.
BACKGROUND AND ANALYSIS
Armenia, Azerbaijan, and Georgia are located south of the Caucasus Mountains that
form part of Russia’s borders (see map). The South Caucasus states served historically as
a north-south and east-west trade and transport “land bridge” linking Europe to the Middle
East and Asia, over which the Russian Empire and others at various times endeavored to gain
control. In ancient as well as more recent times, oil and natural gas resources in Azerbaijan
attracted outside interest. Although Armenia and Georgia can point to past autonomy or
self-government, Azerbaijan was not independent before the 20th century. After the Russian
Empire collapsed in 1917, all three states declared independence, but by early 1921 all had
been re-conquered by Russia’s Red (Communist) Army. They regained independence when
the Soviet Union collapsed in 1991. (For background, see CRS Report RS20812, Armenia
Update; CRS Report 97-522, Azerbaijan; and CRS Report 97-727, Georgia.)
The Caucasus States: Basic Facts
Area: The region is slightly larger than Syria: Armenia is 11,620 sq. mi.; Azerbaijan is 33,774
sq. mi.; Georgia is 26,872 sq. mi.
Population: 16.1 million, similar to Netherlands; Armenia: 3.2 m.; Azerbaijan: 8.3 m.;
Georgia: 4.6 m. (Economist Intelligence Unit and regional governments, 2004 est.)
GDP: $17.6 billion; Armenia: $3.7 b.; Azerbaijan: $8.5 b.; Georgia: $5.4 b. (EIU and regional
governments, 2004 est., market exchange rate)
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Overview of U.S. Policy Concerns
By the end of 1991, the United States had recognized the independence of all the former
Soviet republics. The United States pursued close ties with Armenia, because of its
profession of democratic principles, and concerns by Armenian-Americans and others over
its fate. The United States pursued close ties with Georgia after Eduard Shevardnadze,
formerly a pro-Western Soviet foreign minister, assumed power there in early 1992. Faced
with calls in Congress and elsewhere for a U.S. aid policy for the Eurasian states, then-
President George H.W. Bush sent the FREEDOM Support Act to Congress, which was
signed with amendments into law in October 1992 (P.L. 102-511).
U.S. policy toward the South Caucasus states includes promoting the resolution of the
Armenia-Azerbaijan conflict over Azerbaijan’s breakaway Nagorno Karabakh (NK) region,
and Georgia’s conflicts with its breakaway regions of Abkhazia and South Ossetia.
Successive U.S. Special Negotiators for NK and Eurasian Conflicts have helped in various
ways to settle these conflicts. Congressional concerns about the NK conflict led to the
inclusion of Sec. 907 in the FREEDOM Support Act, which prohibits U.S. government-to-
government assistance to Azerbaijan, except for non-proliferation and disarmament
activities, until the President determines that Azerbaijan has taken “demonstrable steps to
cease all blockades and other offensive uses of force against Armenia and NK” (on waiver
authority, see below). Provisions in FY1996, FY1998, and FY1999 legislation eased the
prohibition by providing for humanitarian, democratization, and business aid exemptions.
Some observers argue that developments in the South Caucasus region are largely
marginal to global anti-terrorism and to U.S. interests in general. They urge great caution
in adopting policies that will heavily involve the United States in a region beset by ethnic and
civil conflicts. Other observers believe that U.S. policy now requires more active
engagement in the South Caucasus. They urge greater U.S. aid and conflict resolution efforts
to contain warfare, crime, smuggling, terrorism, and Islamic extremism and to bolster the
independence of the states. Some argue that such enhanced U.S. relations also would serve
to “contain” Russian and Iranian influence, and that close U.S. ties with Azerbaijan would
benefit U.S. relations with other Islamic countries, particularly Turkey and the Central Asian
states. Many argue that the energy and resource-rich Caspian region is a central U.S.
strategic interest, including because Azerbaijani and Central Asian oil and natural gas
deliveries would lessen Western energy dependency on the Middle East. They also point to
the prompt support offered to the United States by Armenia, Azerbaijan, and Georgia in the
aftermath of the September 11, 2001, attacks by al Qaeda on the United States.
Post-September 11. In the wake of September 11, 2001, U.S. policy priorities
shifted toward global anti-terrorist efforts. In the South Caucasus, the United States obtained
quick pledges from the three states to support Operation Enduring Freedom (OEF) in
Afghanistan, including overflight rights and Azerbaijan’s and Georgia’s offers of airbase and
other support. OEF was later expanded to Georgia (see below, Security Assistance). The
State Department’s Patterns of Global Terrorism 2002 highlighted U.S. support for
Azerbaijan’s and Georgia’s efforts to stop their territories from being used by international
mujahidin and Chechen guerrillas to finance and supply Chechen and other terrorism.
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Congressional attitudes toward Azerbaijan and Sec. 907 also shifted. Presidential
waiver authority was added to Foreign Operations Appropriations for FY2002 (H.R. 2506;
P.L. 107-115). The President may use the waiver authority if he certifies that U.S. aid
supports U.S. counter-terrorism efforts, supports the operational readiness of the armed
forces, is important for Azerbaijan’s border security, and will not harm NK peace talks or be
used for offensive purposes against Armenia. The waiver may be renewed annually, and
sixty days after the exercise of the waiver authority, the President must report to Congress
on the nature of aid to be provided to Azerbaijan, the status of the military balance between
Armenia and Azerbaijan and the effects of U.S. aid on that balance, and the status of peace
talks between Armenia and Azerbaijan and the effects of U.S. aid on those talks. Days after
being signed into law, President Bush on January 25, 2002, exercised the waiver. The waiver
most recently was exercised on January 13, 2005.
Operations in Iraq. Azerbaijan and Georgia were among the countries that openly
pledged to support the U.S.-led Operation Iraqi Freedom (OIF), with both offering the use
of their airbases, and to assist the United States in re-building Iraq. Both countries agreed
to participate, subject to U.S. financial support, in the stabilization force for Iraq. In August
2003, both Azerbaijan (150 troops) and Georgia (69 troops) dispatched forces to Iraq. U.S.
officials reportedly asked Azerbaijan and Georgia at the end of April 2004 to bolster their
troop contributions in the face of Spain’s troop pullout. Georgia boosted its deployment to
about 850 in March 2005, making it among the top ten contributors. Before the U.S.-led
operation in Iraq, Armenia raised concerns about the safety of about 25,000 ethnic
Armenians residing in Iraq, and about Turkish expansionism into Kurdish areas of Iraq. On
July 17, 2003, the Senate Appropriations Committee (S.Rept. 108-106) stated that it “regrets
that Armenia was not more supportive of OIF.” However, in September 2004, the presidents
of Poland and Armenia agreed that Armenian troops could serve with the Polish contingent
in Iraq to carry out humanitarian work and support the ethnic Armenian community residing
there. The Armenian legislature approved the planned deployment, and 46 personnel left
for Iraq in January 2005.
Obstacles to Peace and Independence
Regional Tensions and Conflicts
Ethnic conflicts have kept the South Caucasus states from fully partaking in peace,
stability, and economic development over a decade since the Soviet collapse, some observers
lament. The countries are faced with on-going budgetary burdens of arms races and caring
for refugees and displaced persons. Other costs of ethnic conflict include threats to bordering
states of widening conflict and the limited ability of the region or outside states to fully
exploit energy resources or trade/transport networks.
U.S. and international efforts to foster peace and the continued independence of the
South Caucasus states face daunting challenges. The region has been the most unstable part
of the former Soviet Union in terms of the numbers, intensity, and length of its ethnic and
civil conflicts. The ruling nationalities in the three states are culturally rather insular and
harbor various grievances against each other. This is particularly the case between Armenia
and Azerbaijan, where discord has led to the virtually complete displacement of ethnic
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Armenians from Azerbaijan and vice versa. The main languages in the three states are
dissimilar (also, those who generally consider themselves Georgians — Kartvelians,
Mingrelians, and Svans — speak dissimilar languages). Few of the region’s borders coincide
with ethnic populations. Attempts by territorially-based ethnic minorities to secede are
primary security concerns in Georgia and Azerbaijan. Armenia and Azerbaijan view NK’s
status as a major security concern. The three major secessionist areas of NK, Abkhazia, and
South Ossetia have failed to gain international recognition. NK relies on economic support
from Armenia, and Abkhazia and South Ossetia from Russia.
Nagorno Karabakh Conflict. Since 1988, the separatist conflict in Nagorno
Karabakh (NK) has resulted in up to 20,000 deaths, up to 1 million Azerbaijani refugees and
displaced persons, and about 300,000 Armenian refugees. About 15-20% of Azerbaijan’s
territory, including NK, reportedly is controlled by NK Armenian forces. The OSCE’s
“Minsk Group” of concerned member-states began talks in 1992. A U.S. presidential envoy
was appointed to these talks. A Russian-mediated cease-fire was agreed to in May 1994 and
was formalized by an armistice signed by the ministers of defense of Armenia and
Azerbaijan and the commander of the NK army on July 27, 1994 (and reaffirmed a month
later). The United States, France, and Russia co-chair meetings of the Minsk Group.
The Minsk Group reportedly has presented four proposals as a framework for talks, but
a peace settlement has proved elusive. A new late 1997 step-by-step peace proposal was
recognized by the presidents of Azerbaijan and Armenia as a basis for further discussion.
This led to protests in both countries and to the forced resignation of Armenian President
Levon Ter-Petrosyan in early 1998. Heydar Aliyev in February 2001 stated that he had
“turned down” and refused to discuss a late 1998 Minsk Group proposal embracing elements
of a comprehensive settlement. Other Azerbaijani officials had criticized the proposal’s
alleged vagueness on the character of NK’s proposed “common state”status.
The assassination of Armenian political leaders in late 1999 set back the peace process.
In 2001, the two presidents attended talks in Key West, Florida, and then met with President
Bush, highlighting early Administration interest in a settlement. In January 2003, Armenia’s
President Robert Kocharyan proclaimed that its peace policy rested on three pillars: a
“horizontal” — instead of hierarchical — relationship between NK and Azerbaijan; a secure
land corridor between Armenia and NK; and security guarantees for NK’s populace.
Armenian Foreign Minister Oskanyan in October 2004 stated that the continued occupation
of NK border areas was necessary leverage to convince Azerbaijan to agree to NK’s status
as a “common state,” and that there could be no compromise on this status, since “every inch
of Armenia is priceless, including Karabakh.” In January 2005, media in both countries
reported progress in talks on a “hybrid” peace plan involving the return of most NK border
areas prior to a referendum in NK on its status. PACE adopted a resolution on the NK
conflict in January 2005 that called for Armenian military forces to cease occupying
Azerbaijani territories and urged a peace settlement.
Civil and Ethnic Conflict in Georgia. Several of Georgia’s ethnic minorities
stepped up their dissident actions, including separatism, in the late 1980s and early 1990s,
resulting in the loss of central government control over the regions of South Ossetia and
Abkhazia. Georgian President Mikheil Saakashvili in his inaugural address on January 25,
2004, proclaimed his responsibility to re-integrate these regions into Georgia. Some
observers have argued that Russia’s increasing controls over South Ossetia and Abkhazia
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have transformed the separatist conflicts into essentially Russia-Georgia disputes (see also
below, Russia).
South Ossetia. In 1989, the region lobbied for joining its territory with North Ossetia
in Russia or for independence. Repressive efforts by former Georgian President
Gamsakhurdia triggered conflict in 1990, reportedly leading to about 1,500 deaths. In June
1992, Russia brokered a cease-fire, and a “peacekeeping” force composed of Russian,
Georgian, and Ossetian units has been stationed in South Ossetia (reportedly numbering
around 1,000 troops, including about 530 Russians, 300 South Ossetians, and until recently,
100-150 Georgians). A Joint Control Commission composed of OSCE, Russian, Georgian,
and North and South Ossetian emissaries was formed to promote a settlement of the conflict.
Relations with Georgia deteriorated following a contentious “presidential” election in South
Ossetia in late 2001, won by Russian citizen and St. Petersburg resident Eduard Kokoyev
(also spelled Kokoiti), who had run on a platform of “associating” the region with Russia.
There has been little progress in peace talks. According to some estimates, some 25,000
ethnic Ossetians and 20,000 ethnic Georgians reside in the now largely vacant region.
President Saakashvili increased pressure on South Ossetia in 2004 by tightening border
controls. He also reportedly sent several hundred police, military, and intelligence personnel
into the region. Georgia maintained that it was only bolstering its peacekeeping contingent
up to the limit of 500 troops, as permitted by the cease-fire agreement, and stated that these
peacekeepers were preventing smuggling and guarding ethnic Georgian villages. Georgian
guerrilla forces also reportedly entered the region. Allegedly, Russian defense and security
officers assisted several hundred paramilitary elements from Abkhazia, Transnistria, and
Russia (Cossacks) to enter the region. Georgia’s efforts to win control of the region stalled,
and by late 2004 both sides ostensibly had pulled back most of the undeclared forces.
Saakashvili announced a new peace plan for South Ossetia in late January 2005 that provided
substantial autonomy and quotas for Ossetian representation in federal branches of power.
Kokoiti rejected the plan, asserting that South Ossetia is already independent.
Abkhazia. In July 1992, Abkhazia’s legislature declared the region’s effective
independence from Georgia, prompting Georgian national guardsmen to attack the region.
In October 1992, the U.N. Security Council (UNSC) approved the first U.N. observer
mission to a Eurasian state, termed UNOMIG, to help the parties reach a settlement. Russian
and North Caucasian “volunteer” troops that reportedly made up the bulk of Abkhaz
separatist forces routed Georgian forces, leading in April 1994 to agreement by the two sides
on a framework for a political settlement and the return of refugees. A Quadripartite
Commission (QC) was set up to discuss repatriation. Russian troops (acting as CIS
“peacekeepers”) were deployed in a security zone along the Inguri River that divides
Abkhazia from the rest of Georgia. The conflict resulted in about 10,000 deaths and over
200,000 displaced persons, mostly ethnic Georgians. The U.S. Special Negotiator for NK
and Eurasian Conflicts works with the U.N. Secretary General, his Special Representative,
and other Friends of Georgia (France, Germany, Russia, the United Kingdom, and Ukraine)
to facilitate a peace settlement. A “New Friends of Georgia” group was formed by Bulgaria,
Estonia, Latvia, Lithuania, Poland, and Romania in early 2005 to advocate increased EU and
NATO involvement in Georgia, including in settling conflicts.
In late 1997, the sides agreed to set up a Coordinating Council to discuss cease-fire
maintenance and refugee, economic, and humanitarian issues. The QC meets periodically
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and addresses grievances not considered by the Coordinating Council, which Abkhazia has
boycotted since 2001. These talks have been supplemented by other discussions between
Abkhaz and Georgian representatives. Sticking points between the two sides have included
Georgia’s demand that displaced persons be allowed to return to Abkhazia, after which an
agreement on broad autonomy for Abkhazia may be negotiated. The Abkhazians have
insisted upon recognition of their effective independence as a precondition to large-scale
repatriation. Since 2002, Abkhaz authorities have refused to consider a draft negotiating
document prepared by the U.N. and the Friends of Georgia.
Perhaps alarmed by Russia’s growing control, voters in an October 2004 Abkhaz
“presidential” election apparently rejected the candidate preferred by Moscow. Russia
quickly dispatched an official from its Ministry of Emergencies to serve as the Abkhaz
“premier” to protect its interests. Russia orchestrated a power-sharing arrangement and the
two candidates ran and won on the same ticket in a new election held on January 12, 2005.
Ajaria. Aslan Abashidze had controlled the semi-independent Ajaria region since 1991
and had long resisted many of Shevardnadze’s attempts to establish central authority over
the region. After being elected as Georgia’s president in January 2004, Saakashvili called
for the region to submit to central government authority. Saakashvili successfully appealed
for the allegiance of many Georgian military and police elements in the region, and they
abandoned loyalty to Abashidze. Russia offered sanctuary to Abashidze and flew him to
Moscow on May 6, 2004.
Economic Conditions, Blockades, and Stoppages
The economies of all three South Caucasus states greatly declined in the early 1990s,
affected by the dislocations caused by the breakup of the Soviet Union, conflicts, trade
disruptions, and the lingering effects of the 1988 earthquake in Armenia. Although gross
domestic product (GDP) began to rebound in the states in the mid-1990s, the economies
remain fragile. Investment in oil and gas resources and delivery systems has fueled
economic growth in Azerbaijan in recent years. Armenia’s GDP was about $1,160 per capita,
Azerbaijan’s about $1,020, and Georgia’s about $1,200 (Economist Intelligence Unit and
regional governments, 2004 estimates, market exchange rates). Widespread poverty and
regional conflict have contributed to high emigration from all three states, and remittances
from these emigres provide major support for the remaining populations.
Transport and communications obstructions and stoppages have severely affected
economic development in the South Caucasus and stymied the region’s emergence as an
East-West and North-South corridor. Since 1989, Azerbaijan has obstructed railways and
pipelines traversing its territory to Armenia. These obstructions have had a negative impact
on the Armenian economy, since it is heavily dependent on energy and raw materials
imports. Turkey has barred U.S. shipments of aid through its territory to Armenia since
March 1993. P.L. 104-107 and P.L. 104-208 mandated a U.S. aid cutoff (with a presidential
waiver) to any country which restricts the transport or delivery of U.S. humanitarian aid to
a third country, aimed at convincing Turkey to allow the transit to U.S. aid to Armenia.
According to the U.S. Embassy in Baku, Azerbaijan’s poverty-stricken Nakhichevan exclave
“is blockaded by neighboring Armenia,” severing its “rail, road, or energy links to the rest
of Azerbaijan.” Iran has at times obstructed bypass routes to Nakhichevan. Georgia has cut
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off natural gas supplies to South Ossetia and Russia has at times cut off gas supplies to
Georgia. Georgia severely restricts traffic from South Ossetia.
Democratization Problems
The organization Freedom House considers Armenia and Georgia as somewhat more
democratic than Azerbaijan. It judges the former two as “partly free,” and in 2004
downgraded Azerbaijan’s status to “not free,” in part because of abuses surrounding its 2003
presidential election (see below).
Armenia. Illustrating ongoing challenges to stability in Armenia, in October 1999,
gunmen entered the legislature and opened fire on deputies and officials, killing the prime
minister, the legislative speaker, and six others. The killings may have been the product of
personal and clan grievances. Political infighting led President Robert Kocharyan in mid-
2000 to appoint former Soviet dissident Andranik Margaryan as prime minister. In late 2002,
Margaryan announced that the Republican Party, which he headed, would fully back
Kocharyan in a re-election bid scheduled for February 2003. None of the nine candidates on
the ballot received a required 50% plus one of the vote, forcing a run-off in March by the top
two candidates, Kocharyan and People’s Party head Stepan Demirchyan (the murdered
speaker’s son). OSCE and PACE observers termed the campaign vigorous and largely
peaceful, but concluded that the election did not meet international standards for a free and
fair race, because of “widespread” ballot box stuffing, a lack of transparency in vote-
counting, and other “serious” irregularities.
On May 26, 2003, the Armenian Central Electoral Commission issued preliminary
results for the legislative election and a constitutional referendum held the previous day. In
the party list section of the voting (75 of 131 deputies were elected by party lists), six out of
21 parties running passed a 5% hurdle and won seats. Margaryan’s Republican Party won
about 25% of the votes, the opposition Justice bloc won 14% (led by Stepan Demirchyan),
the pro-government Land of Laws Party won 12%, pro-government Dashnaktsutiun won
10%, the opposition National Unity Movement won 10%, and the pro-government United
Labor Party won 5%. Many seats in individual constituency races were won by party
independents. The OSCE said that the election was “less flawed than the recent presidential
poll, but still fell short of international standards.” Proposed constitutional changes,
including those urged by the Council of Europe, failed to be approved by the voters,
allegedly in part because of a poor government effort to inform the public about the proposed
changes. (See also CRS Report RS20812, Armenia Update.)
Oppositionists in Armenia in early 2004 stepped up their protests against the legitimacy
of President Robert Kocharyan’s 2003 re-election. They argued that a ruling after the
election by the Constitutional Court had called for a referendum to be held within one year
on confidence in the president. Kocharyan termed the Court’s call only advisory, a view also
evinced by the Parliamentary Assembly of the Council of Europe (PACE). The runners-up
in the presidential election, Demirchian and Artashes Geghamian (head of the National Unity
Party) joined forces and urged nationwide civil disobedience until Kocharyan resigned. The
government termed this advocacy a criminal attempt to change the constitutional order and
raided the premises of the main opposition parties, arrested several dozen opposition
activists, and forcibly broke up a demonstration. The U.S. State Department called on the
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government and opposition to peacefully resolve their disputes and termed the government
actions “excessive and contrary to international standards.” At its October 2004 meeting,
PACE resolved that it remained disappointed by the government’s delay in prosecuting those
who orchestrated presidential election “fraud.” Some of those detained in April have been
released and others sentenced to prison terms.
Azerbaijan. Long-time ruler Heydar Aliyev suffered serious cardiac problems in April
2003 and was mostly in hospital up through the expiration of his presidential term. In what
some critics termed a move to ensure a dynastic succession, Ilkham in July became a
candidate in the scheduled October 15, 2003, presidential election, but demurred that he was
running only to buttress his father’s candidacy. On August 4, the legislature hurriedly
convened to confirm Ilkham as prime minister. In early October, the ailing Heydar Aliyev
withdrew from the race in favor of his son. Ilkham Aliyev handily won the election, beating
seven other candidates with about 77% of the vote. Protests alleging a rigged vote resulted
in violence, and spurred arrests of hundreds of alleged “instigators” of the violence.
On October 21, the State Department expressed “deep disappointment” with “serious
deficiencies” in the election and “extreme concern” about post-election violence and
“politically-motivated arrests.” In October 2004, seven leading oppositionists arrested after
the election — People’s Party leader Panah Huseynov, Hope Party Chairman Iqbal Agazada,
Democratic Party secretary-general Sardar Calaloglu, Musavat Party deputy chairmen Arif
Hacili and Ibrahim Ibrahimli, Union of Karabakh Veterans chairman Etimad Asadov, and
Yeni Musavat newspaper editor Rauf Arifoglu — were sentenced to 2-5 years in prison. In
February 2005, the OSCE issued a report that concluded that many of the dozens of post-
election trials fell short of OSCE standards. It had “deep concerns” about pervasive, credible
allegations of torture of detainees. It called on the Azerbaijani government to rescind or
commute the sentences of those convicted in unfair trials. PACE in February 2005 warned
Azerbaijan that its membership status in the COE might be re-evaluated if the problems of
“political prisoners” and a flawed electoral code were not soon resolved. Responding to such
criticism, Azerbaijani presidential administration official Ali Hasanov stated on February 21,
2005, that while the government is interested in dialogue, “no-one, including international
organizations, can speak to [Azerbaijan] in the language of pressure and ultimatums.”
Georgia. Georgia has experienced increased political instability in recent years. Polls
before a November 2, 2003 legislative race and exit polling during the race appeared to
indicate that the opposition National Movement (NM) and the United Democrats (UD)
would win the largest shares of seats in the party list vote. Although admitting that there
were many irregularities, the CEC instead certified results giving the largest shares of seats
to the pro-Shevardnadze “For a New Georgia” bloc and the Revival Party. The U.S. State
Department criticized “massive vote fraud” in Ajaria and some other regions. Mass protests
led to Shevardnadze’s resignation on November 23. Russia and the United States appeared
to cooperate diplomatically to urge Georgians to resolve their crisis peacefully.
UD co-leader and outgoing legislative Speaker Nino Burjanadze assumed the interim
presidency and appointed co-leader Zurab Zhvania as State Minister (to oversee the
ministries). UD and NM agreed to co-sponsor NM head Mikheil Saakashvili for a
presidential election scheduled for January 4, 2004. Saakashvili received 96% of 2.2 million
popular votes from a field of five candidates in the presidential race. OSCE observers judged
the vote as freer and fairer than previous elections and as bringing Georgia closer to meeting
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democratic electoral standards. The legislature approved constitutional amendments in
February that created the post of prime minister, and it confirmed Zhvania for the post (for
background, see CRS Report RS21685, Coup in Georgia). Meeting with visiting President
Saakashvili on February 25, 2004, President Bush termed him “a strong friend, a friend with
whom we share values,” and hailed the rose revolution as “people taking charge of their own
lives and transforming society in a peaceful way,” and as “a powerful example to people
around the world who long for freedom and long for honest government.” In a February
letter of condolence to Saakashvili after Zhvania’s death, President Bush called Zhvania “a
pioneer of democracy,” and Senator Richard Lugar stated that “Zhvania’s legacy lives on
with his co-leaders of the ‘Rose Revolution.’”
The South Caucasus’ External Security Context
Russian Involvement in the Region
Russia has appeared to place great strategic importance on maintaining influence in the
South Caucasus region. Russia has exercised most of its influence in the military-strategic
sphere, less in the economic sphere, and a minimum in the domestic political sphere, except
for obtaining assurances on the treatment of ethnic Russians. Russia has viewed Islamic
fundamentalism as a potential threat to the region, but has cooperated with Iran on some
issues to counter Turkish and U.S. influence. Russia has tried to stop ethnic “undesirables,”
drugs, weapons, and other contraband from entering its borders, and to quash separatism in
its North Caucasus areas while seemingly backing it in the South Caucasus. These concerns,
Russia avers, has led it to maintain military bases in Armenia and Georgia. The states have
responded in various ways to Russian overtures. Armenia has close security and economic
ties with Russia, given its unresolved NK conflict and grievances against Turkey. Russia’s
security actions against its breakaway Chechnya region, its military bases in Georgia, and
support to Abkhaz and South Ossetian separatists draw Georgia’s ire. Azerbaijan has been
concerned about Russia’s ties with Armenia.
Military-Strategic Interests. Russia’s armed presence in the South Caucasus is
multi-faceted, including thousands of military base personnel, “peacekeepers,” and border
troops. The first step by Russia in maintaining a military presence in the region was the
signing of the Commonwealth of Independent States (CIS) Collective Security Treaty (CST)
by Armenia, Russia, and others in 1992, which calls for mutual defense consultations
(Azerbaijan and Georgia withdrew from the CST in 1999). Russia also secured permission
for two military bases in Armenia and four in Georgia. Armenia reportedly pays Russia to
help guard the Armenian-Turkish border. The total number of Russian troops has been
estimated at about 3,500 in Armenia and 5,000 in Georgia. Another 103,000 Russian troops
are stationed nearby in the North Caucasus (The Military Balance 2004-2005). In 1993,
Azerbaijan was the first Eurasian state to get Russian troops to withdraw, except at the
Gabala radar site in northern Azerbaijan. (Giving up on closing the site, in January 2002
Azerbaijan signed a 10-year lease agreement with Russia; Russia’s state-controlled REN
Television reported in late 2003 that there were 1,500 troops at the site.) By October 1999,
most of the Russian border troops had left Georgia, except for some liaison officers.
Armenia has argued that its Russian bases provide for regional stability by protecting it from
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attack. Russia has said that it has supplied weapons to Armenia, including S-300 missiles
and Mig-29 fighters for air defense, to enhance Armenia’s and NK’s security.
Azerbaijan and Georgia have raised concerns about the spillover effects of Russia’s
military operations in Chechnya. In December 1999, the OSCE agreed to Georgia’s request
to send observers to monitor its border with Chechnya (later this monitoring was expanded
to nearby border areas and included 144 monitors in the summer and 111 in the winter). In
December 2004, Russia withheld its approval to extend the observer mandate, terming their
help “ineffective,” and the monitors are leaving Georgia. The United States has backed a
proposal in the OSCE to help train Georgian border guards, but on March 10, 2005, stated
that it was “disappointed” by OSCE delays in assisting Georgia. Some EU members
purportedly advocate creating an EU Caucasus Standby Force if the OSCE deadlock
continues, although some members do not want to jeopardize EU ties with Russia. In March
2005, the EU decided to send two staffers to assist its representative in Georgia but remained
undecided on the issue of border monitoring.
After the September 11, 2001 terrorist attacks in the United States, Russia stepped up
its claims that Georgia harbored Chechen terrorists (with links to al Qaeda) who used
Georgia as a staging ground for attacks into Chechnya. The United States expressed
“unequivocal opposition” to military intervention by Russia inside Georgia. Georgia
launched a policing effort in the Gorge and agreed with Russia to some coordinated border
patrols in late 2002 that somewhat reduced tensions over this issue. In February 2004,
Saakashvili reportedly pledged during a Moscow visit to combat “Wahabbis” (referring to
Islamic extremists) in Georgia, including Chechen terrorists hiding in the Pankisi Gorge and
international terrorists that Russia alleged had transited Georgia to fight in Chechnya (for
background, see CRS Report RS21319, Georgia’s Pankisi Gorge).
Russia’s Bases in Georgia. In 1999 Russia and Georgia agreed to provisions of the
adapted Conventional Armed Forces in Europe (CFE) Treaty calling for Russia to reduce
weaponry at its four bases in Georgia, to close two of the bases (at Gudauta and Vaziani) by
July 2001, and to complete negotiations during 2000 on the status of the other two bases (at
Batumi and Akhalkalaki). The Treaty remains unratified by NATO signatories until Russia
satisfies these and other conditions. Russia moved some weaponry from its bases in Georgia
to Armenia, raising objections from Azerbaijan. On July 1, 2001, Georgia reported that
Russia had turned over the Vaziani base. Russia declared in June 2002 that it had closed its
Gudauta base, but that 320 troops would remain to guard facilities and support Russian
“peacekeepers” taking leave at the base. Georgia has not agreed to this arrangement. As of
early 2005, Russia variously has asserted that it needs $300 million-$1 billion and 3-10 years
to close the other two bases. Then-Secretary Powell stated in December 2004 that the United
States would assist with “reasonable costs” associated with Russia’s withdrawal from the
bases. The Military Balance 2004-2005 reports about 3,000 Russian troops at the bases
(other sources report greater or lesser numbers).
Caspian Energy Resources. Russia has tried to play a significant role in future oil
production, processing, and transportation in the Caspian Sea region. In an effort to increase
influence over energy development, Russia’s policymakers during much of the 1990s insisted
that the legal status of the Caspian Sea be determined before resources are exploited. Russia
has changed its stance by agreeing on seabed delineation with Kazakhstan and Azerbaijan.
Before the September 11, 2001, terrorist attacks in the United States, Putin criticized
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Western private investment in energy development in the Caspian region, and appointed a
special energy emissary to lobby the region to increase its energy ties with Russia. After
September 11, 2001, however, he appeared at least temporarily to ease his criticism of a
growing U.S. presence. At the May 2002 U.S.-Russia summit, the two presidents issued a
joint statement endorsing multiple pipeline routes, implying Russia’s non-opposition to plans
to build oil and gas pipelines from Azerbaijan to Turkey that do not transit Russia. In March
2004, however, a Russian official stated that Putin wanted to ensure that the greatest volume
of Caspian energy flowed through Russian pipelines.
The Protection of Ethnic Russians and “Citizens”. Russia has claimed to be
concerned about discrimination and other human rights abuses committed in Azerbaijan and
Georgia against ethnic Russians and pro-Russian groups. Many observers argue that this
ostensible interest in protecting human rights is a stalking horse for Russia’s
military-strategic and economic interests. As a percentage of the population, there are fewer
ethnic Russians in the South Caucasus states than in most other Eurasian states. According
to the CIA World Factbook, ethnic Russians constituted about 3.6% of the region’s
population in 2002.
A new Russian citizenship law enacted in 2002 made it easier to grant citizenship and
passports to most residents of Abkhazia and South Ossetia, heightening Georgian fears that
Russia de facto has annexed the regions. Russia’s Novosti news service in March 2005
quoted newly elected Abkhaz “president” Sergey Bagapsh as saying that “most Abkhaz
leaders are citizens of Russia, and [I am] also a citizen.” Putin interfered in Abkhazia’s
October 2003 “presidential” election by appearing to favor Abkhaz “prime minister” Raul
Khajimba, a former Russian security agent. This support proved inadequate, however, when
both Khajimba and Baghapsh claimed they had won a close race. Some observers suggest
that many Abkhaz voters had become alarmed by Russia’s growing control and rejected the
candidate preferred by Moscow. Others point out that Baghapsh has close ties to Russia.
Moscow orchestrated a power-sharing arrangement, and the two candidates ran and won on
the same ticket in a new election held in January 2005.
The Roles of Turkey, Iran, and Others
The United States has generally viewed Turkey as able to foster pro-Western policies
and discourage Iranian interference in the South Caucasus states, though favoring Azerbaijan
in the NK conflict. Critics of Turkey’s larger role in the region caution that the United States
and NATO might be drawn by their ties with Turkey into regional imbroglios. Turkey seeks
good relations with Azerbaijan and Georgia and some contacts with Armenia, while trying
to limit Russian and Iranian influence. Azerbaijan likewise views Turkey as a major ally
against such influence, and to balance Armenia’s ties with Russia. Armenia is a member of
the Black Sea Economic Cooperation zone, initiated by Turkey, and the two states have
established consular relations. Obstacles to better Armenian-Turkish relations include
Turkey’s rejection of Armenians’ claims of genocide in 1915-1923 and its support for
Azerbaijan in the NK conflict, including the border closing. Georgia has an abiding interest
in ties with the approximately one million Georgians residing in Turkey and the
approximately 50,000 residing in Iran, and has signed friendship treaties with both states.
Turkey and Russia are Georgia’s primary trade partners. Turkey has hoped to benefit from
the construction of new pipelines delivering oil and gas westward from the Caspian Sea.
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Iran’s goals in the South Caucasus include discouraging Western powers such as Turkey
and the United States from gaining influence (Iran’s goal of containing Russia conflicts with
its cooperation with Russia on these interests), ending regional instability that might threaten
its own territorial integrity, and building economic links. A major share of the world’s
Azerbaijanis reside in Iran (estimates range from 6-12 million), as well as about 200,000
Armenians. Ethnic consciousness among some “Southern Azerbaijanis” in Iran has grown,
which Iran has countered by limiting trans-Azerbaijani contacts. Azerbaijani elites fear
Iranian-supported Islamic extremism and object to Iranian support to Armenia. Iran has
growing trade ties with Armenia and Georgia, but its trade with Azerbaijan has declined. To
block the West and Azerbaijan from developing Caspian Sea energy, Iran long has insisted
on either common control by the littoral states or the division of the seabed into five equal
sectors. Iranian warships have challenged Azerbaijani oil exploration vessels. U.S. policy
aims at containing Iran’s threats to U.S. interests (See CRS Report RL32048, Iran: U.S.
Concerns and Policy Responses). Some critics argue that if the South Caucasus states are
discouraged from dealing with Iran, particularly in building pipelines through Iran, they face
greater pressure to accommodate Russian interests. (See also below, Energy.)
Among non-bordering states, the United States and European states are the most
influential in the South Caucasus in terms of aid, trade, exchanges, and other ties. U.S. and
European goals in the region are broadly compatible, involving integrating it into the West
and preventing an anti-Western orientation, opening it to trade and transport, obtaining
energy resources, and helping it become peaceful, stable, and democratic. The South
Caucasus region has developed some economic and political ties with other Black Sea and
Caspian Sea littoral states, besides those discussed above. Azerbaijan shares with Central
Asian states common linguistic and religious ties and concerns about some common
bordering powers (Iran and Russia). The South Caucasian and Central Asian states have
common concerns about ongoing terrorist threats and drug trafficking from Afghanistan.
Central Asia’s increasing energy and other trade with the South Caucasus will make it more
dependent on stability in the region.
U.S. Aid Overview
The United States is the largest bilateral aid donor by far to Armenia and Georgia, and
the two states are among the four Eurasian states that each have received more than $1
billion in U.S. aid FY1992-FY2004 (the others are Russia and Ukraine). See Table 1. U.S.
assistance has included FREEDOM Support Act programs, food aid (U.S. Department of
Agriculture), Peace Corps, and security assistance. Armenia and Georgia have regularly
ranked among the top world states in terms of per capita U.S. aid, indicating the high level
of concern within the Administration and Congress. Foreign Operations Appropriations for
FY1998 (P.L. 105-118) created a new South Caucasian funding category, which still exists,
to emphasize regional peace and development. The Conference Report (H.Rept. 108-792)
on H.R. 4818 (P.L.108-447; Consolidated Appropriations for FY2005) directed FREEDOM
Support Act (FSA) and Foreign Military Financing (FMF) funding for Azerbaijan and
Georgia that matched, or nearly matched, the amount called for by the request, but somewhat
boosted such requested aid to Armenia (from $62 million to $75 million in FSA aid and from
$2 million to $8 million in FMF). Apparently in anticipation of congressional calls for
parity, the Administration’s FY2006 foreign aid budget requests the same amounts for FMF
and IMET for both Armenia and Azerbaijan ($5 million for FMF and $750,000 for IMET).
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Besides bilateral aid, the United States contributes to multilateral organizations such as the
International Monetary Fund and the World Bank that aid the region.
In January 2004, Congress authorized a major new development assistance program,
the Millennium Challenge Account (Section D of P.L. 108-199). Shortly thereafter, all three
South Caucasus states were designated as candidates for aid by the newly established
Millennium Challenge Corporation. It announced in May 2004 that Armenia and Georgia
would be among the first states invited to apply for aid. Georgia was deemed eligible despite
scoring below the median on the categories “ruling justly,” “encouraging economic
freedom,” and “investing in people,” with the Corporation arguing that the new government
in Georgia appeared committed to reforms. This assistance could dwarf that appropriated
under the authority of the FREEDOM Support Act. None of this aid as of early 2005 had yet
been released to Armenia or Georgia.
In perspective, cumulative aid from the European Union (EU) to the region has totaled
about $1 billion over the past decade. However, in 2004 EU foreign ministers invited the
South Caucasus states to participate in a “Wider Europe” program of enhanced aid, trade,
and political ties. A World Bank/EU-sponsored donor conference that month resulted in
over $1 billion in three-year pledges for development in Georgia (U.S. pledges amounted to
about one-third of the total).
U.S. Security Assistance
The United States has provided some security assistance to the region, and bolstered
such aid after 9/11, though overall aid amounts to the countries did not increase post-9/11
as they did in regard to the Central Asian “front line” states in the war on terrorists in
Afghanistan (see Table 1). Azerbaijan and Georgia play “important” anti-terrorism roles,
according to the Administration, including by sending some troops to support coalition
actions in Afghanistan and Iraq. In Georgia, Congress in 1997 directed setting up a Border
Security and Related Law Enforcement Assistance Program. The United States has
committed millions of dollars to facilitate the closure of Russian military bases in Georgia.
Congress initiated the Security Assistance Act of 2000 (P.L. 106-280) that authorized
nonproliferation, export control, border, anti-terrorism, and other security aid for the South
Caucasus states and earmarked such aid for Georgia.
Azerbaijani and Georgian leaders have stated that they want their countries to join
NATO; much greater progress in military reform, however, will likely be required before
they are considered for membership. All three states joined NATO’s Partnership for Peace
(PFP) in 1994. Troops from Armenia, Azerbaijan, and Georgia serve as peacekeepers in
NATO-led operations in Kosovo and the latter two states support NATO-led operations in
Afghanistan. There reportedly have been some fistfights and even a murder involving
Armenians and Azerbaijanis during some PFP activities. NATO cancelled a PFP exercise
in Azerbaijan in September 2004, stating that Azerbaijan had violated NATO principles of
inclusiveness by refusing to host Armenian forces. The June 2004 NATO summit pledged
enhanced attention to the South Caucasian and Central Asian PFP members. A Special
Representative of the NATO General Secretary was appointed to encourage democratic civil-
military relations, transparency in defense planning and budgeting, and enhanced force inter-
operability with NATO.
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Until waived, Sec. 907 had prohibited much U.S. security aid to Azerbaijan, including
Foreign Military Financing (FMF), and International Military Education & Training (IMET).
By U.S. policy, similar aid had not been provided to Azerbaijan’s fellow combatant Armenia.
From 1993-2002, both had been on the Munitions List of countries ineligible for U.S. arms
transfers. The Conference Report (H.Rept. 108-792) on H.R. 4818 (P.L.108-447;
Consolidated Appropriations for FY2005) directed that FMF funding for Armenia be boosted
to match that for Azerbaijan (from $2 million as requested to $8 million). The Members
appeared to reject the Administration’s assurances that the disparate aid would not affect the
Armenia-Azerbaijan military balance or undermine peace talks.
A $64 million Georgia Train and Equip Program (GTEP) was carried out in 2002-2004
that U.S. officials explained would help Georgian military, security, and border forces to
combat Chechen, Arab, Afghani, al Qaeda, and other terrorists who allegedly had infiltrated
Georgia. Some of these terrorists allegedly had fled U.S.-led coalition operations in
Afghanistan, so the GTEP was initially linked to the Afghan campaign. Other reported U.S.
aims include bolstering Georgia’s ability to guard its energy pipelines and ensuring internal
stability. U.S. officials say there are no plans to establish a permanent U.S. military presence
in Georgia. Although GTEP ended in May 2004, follow-on programs provide training to
troops destined to serve in Iraq, training for boot camp instructors, advice on reorganizing
the military, and support to GTEP-trained units.
U.S. Trade and Investment
The Bush Administration and others maintain that U.S. support for privatization and the
creation of free markets directly serve U.S. national interests by opening new markets for
U.S. goods and services, and sources of energy and minerals. Among U.S. economic links
with the region, bilateral trade agreements providing for normal trade relations for products
have been signed and entered into force with all three states. Bilateral investment treaties
providing national treatment guarantees have entered into force. U.S. investment is highest
in Azerbaijan’s energy sector, but rampant corruption in the three regional states otherwise
has discouraged investors. With U.S. support, in June 2000 Georgia became the second
Eurasian state (after Kyrgyzstan) to be admitted to the WTO. The application of Title IV of
the Trade Act of 1974, including the Jackson-Vanik amendment, was terminated with respect
to Georgia in December 2000, so its products receive permanent nondiscriminatory (normal
trade relations or NTR) treatment. Armenia was admitted into WTO in December 2002.
The application of Title IV of the Trade Act of 1974, including the Jackson-Vanik
amendment, was terminated with respect to Armenia in January 2005 (P.L. 108-429). (For
further information, see CRS Report 98-545, The Jackson-Vanik Amendment: A Survey.)

Energy Resources and U.S. Policy
The U.S. Energy Department reports estimates of 1.2 billion barrels of proven oil
reserves, and estimates of 4.4 trillion cubic feet of proven natural gas reserves in Azerbaijan
(Country Analysis Brief, June 2002). Many problems remain to be resolved before
Azerbaijan can fully exploit and market its energy resources, including political instability,
ethnic and regional conflict, and the security and construction of pipelines.
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U.S. policy goals regarding energy resources in the Central Asian and South Caucasian
states have included supporting their sovereignty and ties to the West, supporting U.S.
private investment, breaking Russia’s monopoly over oil and gas transport routes by
encouraging the building of pipelines that do not traverse Russia, promoting Western energy
security through diversified suppliers, assisting ally Turkey, and opposing the building of
pipelines that transit Iran. These goals are reflected in the Administration’s May 2001
National Energy Policy report. It recommends that the President direct U.S. agencies to
support building the so-called Baku-Tbilisi-Ceyhan (BTC) oil pipeline, expedite use of the
pipeline by oil companies operating in Kazakhstan, support constructing a gas pipeline to
export Azerbaijan’s Shah Deniz gas, and otherwise encourage the Caspian regional states to
provide a stable and inviting business climate for energy and infrastructure development.
Since September 11, 2001, the Administration has emphasized the vulnerability of the
United States to possible energy supply disruptions and intensified its commitment to
develop Caspian energy and the BTC pipeline as part of a strategy of diversifying world
energy supplies. U.S. companies are shareholders in three international production-sharing
consortiums, including the Azerbaijan International Operating Company (AIOC; which
includes U.S. firms Unocal and Exxonmobil, U.S. Devon Energy, and U.S.-Saudi Delta
Hess), formed to exploit Azerbaijan’s oil and gas fields. In 1995, Heydar Aliyev and the
AIOC decided to transport “early oil” (the first and lower volume of oil) through two
revamped Soviet-era pipelines in Georgia and Russia to ports on the Black Sea, each with
a capacity of around 100-115,000 barrels per day. The trans-Russia “early oil” pipeline
began delivering oil to the port of Novorossiisk in late 1997. The trans-Georgian pipeline
began delivering oil to Black Sea tankers in early 1999.
The Clinton Administration launched a campaign in 1997 stressing the strategic
importance of the BTC route as part of an “Eurasian Transport Corridor.” In November
1999, Azerbaijan, Georgia, Turkey, and Kazakhstan signed the “Istanbul Protocol” on
construction of a 1,040-mile BTC oil pipeline. In August 2002, the BTC Company was
formed to construct, own, and operate the oil pipeline (U.S. construction firms awarded
contracts include Bechtal and Petrofac). BTC hopes to begin loading oil tankers at Ceyhan
in mid-2005. The pipeline does not cross Armenia, raising objections from some in Armenia
of lack of access. On the other hand, Armenian Foreign Minister Oskanyan on January 14,
2004, suggested that the opening of the BTC pipeline would make Azerbaijan reticent to
launch conflict. Armenia and Iran signed accords in May and September 2004 on building
a gas pipeline to link up with Iran’s pipelines.
Table 1. U.S. FY1992-FY2004 and FY2004Budgeted Aid, FY2005
Estimated Aid, and the FY2006 Foreign Assistance Request
(millions of dollars)
South Caucasus
FY1992-FY2004
FY2004 Budgeted
FY2005
FY2006
Country
Budgeted Aida
Aida
Estimatec
Requestc
Armenia
1,487.6
79.82
80.7
63.19
Azerbaijan
500.11
49.63
52.61
48.13
Georgia
1,409.0
93.93
103.72
85.25
Total
3,396.71
223.38b
237.03
196.57
Sources: State Department, Office of the Coordinator for U.S. Assistance to Europe and Eurasia; State Department, U.S.
Government Assistance to and Cooperative Activities with Eurasia: FY2003 Annual Report, January 2004.
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a. FREEDOM Support Act and Agency budgets; b. Caucasus Regional funds are included in the total. c. FREEDOM
Support Act and other Function 150 funds (does not include Defense or Energy Department funding or funding for
exchanges).
LEGISLATION
H.Res. 108 (Gallegly)/S.Res. 46 (Lugar)
Commemorating the life of the late Zurab Zhvania, former Prime Minister of the
Republic of Georgia. Expresses deepest condolences to the family of Zurab Zhvania;
commends his courage, energy, political imagination, and leadership that were critical to
democratic Georgia’s development; and recognizes that Georgia’s integration into Euro-
Atlantic institutions will be the completion of Zhvania’s vision and his most lasting legacy.
H.Res. 108 adds condolences to the people of Georgia for the death of their prime minister
and expresses solidarity with the people and government of Georgia. S.Res. 46 introduced
and agreed to in the Senate on February 8, 2005. H.Res. 108 introduced on February 16,
2005, and considered by the House International Relations Committee on March 9, 2005.
S.Res. 69 (Lugar)
A resolution expressing the sense of the Senate about the actions of Russia regarding
Georgia and Moldova. Resolves that the United States should urge Russia to live up to its
1999 OSCE commitments to close or otherwise resolve the status of its military bases in
Georgia and Moldova; maintain strong diplomatic pressure (in cooperation with European
allies) to permit an OSCE Border Monitoring Operation (BMO) in Georgia to continue; and
seek (if BMO ceases to exist) an international presence to monitor borders between Georgia
and Russia’s regions of Chechnya, Dagestan, and Ingushetia. Introduced on March 3, 2005,
and agreed to on March 10.
Figure 1. Map of the Region
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